BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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To see whether it has been more or less profitable to manufacture the products rather than purchase them
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To report to managers on the quality of their products
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To apportion costs to different areas of the business
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To investigate how many units are required to breakeven
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Detailed explanation-1: -Manufacturing cost comprises of direct materials, direct labor, and manufacturing overhead. This cost can further be categorized into conversion cost and prime cost.
Detailed explanation-2: -Manufacturing costs fall into three broad categories of expenses: materials, labor, and overhead. All are direct costs. That is, the salary of the company accountant or the accountant’s office supplies are not included, but the salary and supplies of the foreman are.
Detailed explanation-3: -Under the variable costing method, only the variable cost to produce is considered as a product cost. All other costs incurred will be treated as period costs. A product cost is capitalized as an inventory cost while a period cost is expensed outright.